a. How can tax on Pfizer's income be negative?

Does it mean Pfizer saved that much money or

they received that much amount from the government in Cash? ( 300 words)

Pfizer income tax is negative. It means company has received that around 9 billion dollar from
government for overseas tax cuts for company in 2017 so Pfizer’s income tax is negative They
also reported an estimation of the particular effects of the TCJA during the fourth quarter,
including the impact on deferred tax assets and liabilities from the reduction of the corporate tax
rate from 35 percent to 21 percent, the repatriation tax liability of $15.2 billion on accrued post-
1986 foreign earnings, and the impact on valuation allowances and other factors of state income
tax. As a result of TCJA, an estimation of deferred taxes that are no longer expected to be
necessary due to the territorial tax system's change has been reversed. In the past, they have
had deferred tax obligations on international earnings that were not reinvested indefinitely. The
estimated amounts recorded may change in the future due to uncertain tax positions.

b. What is the effective rate of tax for Pfizer? Can it be negative? Why? ( 250 words)

Effective tax rate for Pfizer in 2017 is negative 73.5%. Their effective tax rate on continuing
operations for 2017 was cordially impacted by the enactment of the TCJA, the expiration of
certain statues of limitations in multiple jurisdictions covering various periods, favorable
audit settlements and other factors like:
•Tax benefits related to the re-measurement of deferred tax liabilities.
• a favorable adjustment in the jurisdictional composition of earnings due to operating
fluctuations in the ordinary course of business, partly offset by a decline in the benefits
associated with the resolution of some tax positions in previous years, mainly regarding
various foreign tax authorities and the expiration of certain limitations statutes.
•And the non-recurrence of benefits relating to the final settlement of an agreement
concluded in principle in February 2016.

c. Give us brief details of what sort of tax benefits and tax expenses impacted FY 2017's
Provision/(benefit) for taxes on income? (300 words)
During year 2017, The tax benefits and tax expenses that impacted FY 2017’s provision/ benefits
for taxes on income are:

• Estimated U.S. net tax benefits of $10.7 billion associated with the enactment of the TCJA
◦ Tax benefit of approximately $22.8 billion associated with the remeasurement of U.S.
deferred tax liabilities on unremitted earnings of foreign subsidiaries.
◦ Tax benefit of approximately $1.6 billion associated with the remeasurement of other U.S.
deferred tax liabilities, primarily associated with intangibles.
◦ Tax expense of approximately $12.9 billion related to the repatriation tax on deemed
repatriated accumulated pre-2017 post-1986 earnings of foreign subsidiaries.
◦ Tax expense of approximately $1.0 billion related to future taxes on global intangible low-
taxed income and approximately $100 million tax benefit primarily associated with certain
tax initiatives.
• U.S. tax expense of approximately $1.3 billion related to the repatriation tax on deemed
repatriated current year earnings of foreign subsidiaries.
• Tax benefit of approximately $370 million related to net losses on early retirement of debt.
• Tax benefits of approximately $150 million representing tax and interest resulting from the
resolution of certain tax positions pertaining to prior years primarily with various foreign tax
authorities, and the expiration of certain statutes of limitations; and the non-deductibility of a
$307 million fee payable to the federal government as a result of the U.S. Healthcare
Legislation.
Tesla
1. When Tesla receives a $1,000 reservation payment from a customer, what Tesla general
ledger accounts does this $1,000 impact? Explain.
It will impact the cash balance to increase, which is part of the balance sheet assets since the
cash is already collected. Moreover, the reservation payment that Tesla received, which is
$1000, is refundable until the customer will sign the purchased agreement. This means that it will
be credited to the company's liability, which is the customer deposits. Depending on the period of
deposit, it may be non-current liability or current liability. Tesla will refund the amount if the
customer cancels. Thus, this is considered as Tesla's liability.
When Tesla receives $ 1,000 reservation payment, the journal entry would be as follows:

Dr. Cash a/c $ 1000

Cr. To Unearned Revenue $ 1000

(To record reservation payment for model 3 from customer)

2. Now assume that a customer orders a Model 3 by completing the purchase agreement.
Will this purchase agreement directly impact Tesla’s balance sheet or income statement at
the date of the purchase agreement?
Since revenue for sale is only recognized on the day of car delivery, Completing the purchase
agreement will not directly impact Tesla's income statement or balance sheet. Even at this
point, The only account that will be affected is only the balance sheet. Income statement gets
affect only when the goods has been delivered, or the actual service has been made. Thus, No
entry occurs in Income statement.
After completing the agreement's purchase, the reservation payment of $1000 received will
be transferred to unearned revenue under current liabilities from the customer deposits. Thus,
the reservation payment of $1000 will become non-refundable.
So, the purchase agreement will not directly impact Tesla's balance sheet or income
statement on the purchase agreement's date. Entry for Purchase agreement shall be as
follows:-
Dr. Unearned Revenue $ 1000

Cr Accounts Receivable - customer name $ 1000

(To record advance received from customer against purchase agreement)

3. When the Model 3 is delivered to the customer and payment is received, how will Tesla’s
balance sheet and income statement be impacted at the point of delivery?
As explained in my answer to Question 2, Revenue is recognized when delivery takes place. So
entry of sale for long-range battery Model 3 shall be as follows: (let's assume price of Standard
range battery model 3)

Dr. Accounts Receivable-customer $ 35,000

Cr. Sales Revenue $ 35,000

(To record revenue generated from delivery of product to customer)

Dr. Cash $34,000

Cr. Accounts Receivable - customer $ 34,000

(To record payment received from customer after adjusting advance payment of $ 1000)

Based on the above entry, at the time of delivery of the car, Revenue will be recognized and gets
accounted for sale revenue and form part of the income statement. While delivery, the full value
of the product, $ 35,000, will be accounted to Accounts receivable. But it will be adjusted, and the
net amount will be accounted for $ 34,000 because there is already a credit balance of $1000 in
the balance sheet. Cash generated from the sale is accounted for in the balance sheet, and
Revenue generated from the sale is accounted for in the income statement. Therefore Asset will
increase, and liability will decrease.